A partnership firm earned net profits during the last three years as follows: 1986- Rs. 17,000; 1987- Rs. 20,000; 1988- Rs. 23,000. The capital investment in the firm throughout the above mentioned period has been Rs. 80,000. Having regard to the risk involved, 15% is considered to be a fair return on the capital. Calculate the value of goodwill on the basis of 2 years' purchase of everage super profits earned during the above mentioned three years.

Answer rating: 100% (QA)

To calculate the value of goodwill we will use the formula Goodwill 2 years purchase of ave... View the full answer